Iron ore rout leaves Aussie on weak footing

Chinese stock melt down is causing massive headwinds for commodities across globe, which in turn likely to add downside pressure to commodity currencies.

Benchmark iron ore (62% content), which is major ingredient for steel making industry dropped 11% today. Today's drop is largest on record. Price dropped $5.6/ton to six year low at $44.1 per ton.

In last two weeks commodities as a whole has lost almost 25% of their values.

As of now, supply remains ample compared to demand.

Price drop in Iron ore is extremely troublesome for Aussie as it stands as the major export of the country.

Iron ore constitutes of 20% of Australian exports and revenue from it presents 4-5% of Australia's GDP.

Aussie this week has cleared a major support around 0.75 against dollar.

Trade idea -

• Sell Aussie against dollar targeting 0.715 as initial target, 0.70 as second one and 0.65 as final target. Stop loss should be maintained around 0.775 and 0.82 area.